Everyone knows that paying your bills on time is essential if you want to get — or keep — strong credit scores. But does the size of your payments affect your credit scores? Our reader Nicole asks:
I’ve spent the last year doing my best to clean up my financial snafus. One of the things that I did was get myself on a budget; as I am paid weekly, I broke down my bills into weekly payments and pay everything when I get paid on Fridays. It has taken the better part of the whole year to get everything under control, but with this I’ve been able to pay off the smaller of my two credit cards and stay on top of my bills and not splurge on ‘ghost money’ that is sitting in my account, waiting to be used.
But when I look at my credit report, it is showing the weekly payment amount rather than the total amount paid. Does this affect my score badly as it looks like it is less than the amount required?
I checked with Nicole to make sure that her credit reports don’t list any late payments, and she confirmed they don’t. I then turned to Credit.com’s credit scoring expert Barry Paperno for advice on how these smaller payments might impact her scores. Barry weighed in: “If there’s nothing showing as past due there won’t be any negative impact to the score from making weekly payments. The FICO score doesn’t look at the payment amount at all. Good question, but nothing to worry about.”
[Related Article: 8 Surprising Things That Affect Your Credit]
Jeff Richardson, vice president of VantageScore Solutions, concurs. “As long as the lender is reporting the account as current during the previous month, and the weekly payments cover the minimum amount due, then there would be no impact from paying a bill weekly,” he says.
For many of our readers, I imagine the idea that the payment amount doesn’t affect your scores will come as a surprise. In fact, I’ve heard many myths about how payments affect credit scores over the years, such as:
I pay more than the minimum on my credit cards; that must be helping my scores. Paying more than the minimum due may help your credit over the long run. Not only can it cut your interest costs, but it can help you pay down your balances faster. But it doesn’t boost your scores immediately.
[Related Article: 5 Credit Myths to Ditch in 2013]
I pay my balance in full each month so that helps my scores. This one can be tricky. Your credit report lists the balance as of the date the lender reported it, but there’s no specific notation that indicates you paid in full. Depending on the timing of your payment and the issuer’s reporting cycle, your account may list a balance even if you paid it off entirely when due.
For anyone wanting to try Nicole’s strategy, my advice is to proceed carefully. Make sure your issuer can accept multiple payments throughout the month and keep good records in case they mess up and count you as late. Always make sure you’ve paid at least the minimum payment due each month to avoid a late payment on your credit, which can drop your credit scores significantly.
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